High renewables development costs are a ‘symptom’ of inflexible power grids: IRENA chief

Having more energy storage facilities can help shake Southeast Asia’s reliance on fossil fuels, said the head of the intergovernmental body championing the use of renewables in a sit-down with Eco-Business.

DG IRENA La Camera SIEW 2023
Francesco La Camera, director-general of the International Renewable Energy Agency, speaking at the Singapore International Energy Week 2023 conference in October. Image: Singapore International Energy Week.

There is growing momentum to install more renewables globally, with major economies and hundreds of businesses already putting their weight behind a pledge to triple renewable energy capacity over the next seven years ahead of the COP28 climate summit next month.

But Southeast Asia continues to face teething troubles, with one of the greatest barriers being its outdated power grids, according to Francesco La Camera, director-general of the International Renewable Energy Agency (IRENA).

The lack of a decentralised, flexible power system that can support large volumes of intermittent renewable energy is an “illness”, with the symptom being the high capital costs of clean energy projects today, La Camera told Eco-Business. Greater energy storage capacity and more interconnections between clean energy sources and end-users are needed to balance the power grid, a role currently played by fossil fuels, he added.

While traditional fuel-based power plants can adjust power output based on demand, output from solar panels and wind turbines are heavily dependent on weather conditions. Mismatch between electricity output and needs results in unplanned curtailments and financial losses for clean power providers. Such episodes have been common in Vietnam, the region’s renewables powerhouse, after heavy subsidies over the past few years resulted in a massive influx of solar power.

As it stands, fossil fuels still dominate Southeast Asia’s energy mix, at over 80 per cent in 2020. 

“The region stands at a crossroads against climate shocks and opportunities for transition with its abundant and scalable resources,” La Camera told the Singapore International Energy Week conference last week, adding that policymakers need to prioritise long-term low-emissions development over short-term economic gain.

Eco-Business sat down with La Camera on the sidelines of the event to speak more about the challenges Southeast Asia faces, and the safeguards needed as the region pursues growth opportunities in the mining of energy transition metals.

You’ve been in Malaysia twice this year, and now in Singapore. What has been clean energy players’ sentiment around renewables in the region?

The sentiment is positive, everyone is committing or agreed to commit to the global pledge of tripling renewable energy to 11 terawatts by 2030. Naturally for many countries here, they need financing and technology transfer, and you would expect these requirements to be at the heart of COP28 negotiations.

The region is dealing with high supply chain and capital costs, along with global geopolitical tensions. Do you see that weighing on Southeast Asia’s clean energy push?

When you say the cost of capital is high, these are symptoms of an illness – which is the lack of grids, interconnections and flexibility to balance intermittent renewables. The market is also still designed with policy and laws that are looking back to the old centralised system. 

The investments required today need to look at costs differently than in the past. In the short term, the upfront costs of renewables could be disadvantageous, but the fact is that costs after that will remain very low. It is not a question of risk, but a realisation that in the long run you certainly can earn revenue.

How ready are Southeast Asian markets to scale up renewable energy?

The region faces many challenges, I think the most relevant for decarbonisation is the fact that much of its energy comes from coal, and the coal plants are relatively young. The other challenge is that the region is not as interconnected as it should be for getting more renewable energy into the grid. These issues are probably impacting financing and investments.

This is not just for Southeast Asia – the reality is that many regions are not yet ready. There are three main barriers: physical infrastructure, the policy environment, and the capacity of the workforce.

To address these, we are working on providing a kind of certification for skilled labour, so that foreign investments coming into a country can employ the local workforce, instead of bringing people in from abroad.

In terms of finance, we have US$150 trillion of assets committed to net-zero emissions globally. We need about US$4 trillion a year [invested in renewable energy] – just over 2 per cent of the total sum. We need to put in place the right policy to attract this capital. We are calling for multilateral financial institutions to invest more in the infrastructure needed to allow new energy systems to be installed. We are also going to launch an initiative with utility firms to see how we can create regional plans to attract investments.

But we already see, for instance in Vietnam, that offshore wind works very well, and the country has crafted policies to connect offshore turbines to the grid.

There are also other opportunities – the region is progressing on biofuels, renewables manufacturing and decentralised solar grids. The region is also rich in critical minerals. The potential for both solar and wind is there, in some regions it is more solar, in others more wind. Interconnectivity across the region will help them work efficiently.

We published last year the second renewables outlook for Asean and a socio-economic analysis for the region, which serve as guides for accelerating the adoption of renewables.

Southeast Asia is still big on gas developments, and extending the role of fossil fuels with technologies like carbon capture, storage and utilisation. Do you see this affecting the renewables market?

The argument is that gas helps to balance the power system, so that there can be more renewables. This proposition comes from the fact that the grid cannot compensate itself [against intermittent renewables]. But if you have a grid with energy storage, you don’t need to have any other kinds of fuel to balance the entire system.

Renewables can self-balance, if the logistics are in place – batteries, as well as hydropower and geothermal for countries that have these sources. Each country will need to find a way to use all these resources in a comprehensive way. But the problem of infrastructure, again, is the one that we see as the most important now.

Is it too early to talk now about end-of-life management, and recycling, of equipment like solar panels in this region? 

In general, this equipment is highly recyclable – be it the solar panels, or wind turbine blades. We are not there yet, but in the future around 90 per cent of such hardware can be recycled. In this way, the pressure for more minerals will decrease. Innovation [in equipment recycling] will go towards where it is more profitable, and where there are more investors trying to solve this issue.

Awareness has increased, but more can be done through policy frameworks. In the region, Vietnam has already prepared a law for the recycling of retired solar panels. IRENA is also working on an upcoming report on the end-of-life management of solar such equipment.

The mining of energy transition minerals is growing across Southeast Asia. Do you feel that the rules to mitigate the environmental impact of mining are sufficient?

In principle, the supply of critical minerals is not a barrier to the growth of renewables today, but naturally the demand [for the minerals] will increase in the future. So this is a matter of concern, and we have to address it through mining.

The way we mine needs to take into account environmental concerns and human rights. There are mines that still use manual operations – by hand – and there are instances of child labour in some parts of the world. It is possible to manage these risks.

To boost local economic development, Southeast Asia needs to go from mining to mineral processing. For example, Indonesia’s temporary nickel export ban [instated in 2020] has helped attract investments in production facilities and nurtured its downstream industry.

IRENA’s recent report on the geopolitics of critical materials for the energy transition also recommended strategies for maximising domestic socioeconomic benefits, such as creating state-owned resource companies and improving regional collaboration on mineral value chains.

We also need to shift to new technologies to be able to use the most abundant minerals, or reduce the use of minerals. For example solar panels could provide power for 24 hours when paired with water cylinders as hydro-based energy storage [in place of batteries].

How big a challenge is a just transition for this region? We continue to hear concerns at this conference around the impact on jobs and communities.

Renewable energy can support more jobs than traditional energy sources – the estimate is three to one. So I do not support this idea that it will be difficult to transition the workforce [towards renewables]. We also notice that in renewables, the share of women in the workforce is higher than in fossil fuels.

But when we look at a just transition, it is not just about ensuring that those losing jobs are getting new ones. For us, the point of departure is the existing inequalities – in energy access, and wealth. Renewables and the decentralisation of the energy system can play a good role in reducing inequalities.

This interview has been edited for brevity and clarity.

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